Your search for a suitable business
can be a complicated task. Throughout the process however it's important
to keep an open mind while searching for something that will fit your
particular needs, talents, skills and lifestyle. As business brokers we
have many different types of businesses for you to consider, but you
need to remember that the business that matches all of your requirements
exactly is rare – you can often achieve that “perfect" business only by
adding your own personal touches to an otherwise “sound” business.
What should you look for?
As a buyer you should start by giving some thought to the type of
business that suits your talents and capabilities, and which you would
feel comfortable owning and operating. "Pride of Ownership" is an
important ingredient for success. The next thing is to realistically
determine what level of financial return you want from such a business.
To be considered seriously it must (at the very least) supply you with
enough income - after making any interest/loan payments – for you to pay
your bills and reimburse you for your efforts. (Of course you will have
your own ideas and plans so you need to keep an eye out for what you
can do with the business - how you can improve it and make it more
productive and profitable. It all depends on you!) The other key
question at this stage is how much you are prepared to invest to buy the
business. There is very little to be gained from looking at any
business that has a purchase price well in excess of what you are
willing to pay.
“Why should I use a business
A professional business broker can be very helpful in your search for a
suitable business. They can provide you with a selection of different
and, in many cases, unique businesses, including many that you would not
be able to find on your own. Business brokers are also an excellent
source of information about businesses and the business buying process.
They are familiar with the market and can advise you about trends,
pricing and what is happening locally. Your business broker will assist
with the details of the business sale and will do everything possible to
guide you in the right direction, including, if necessary, consulting
other professionals who may be able to assist you.
“Why should I buy a business rather than start one?”
An existing business of course has a track record, and it has
demonstrated that there is a need for that product or service in a
particular location. This should be supported by financial records along
with other information about the business. Most sellers will also stay
on and train you as the new owner and teach you the specific intricacies
of running the business.
Get the basic facts
Once you have identified a suitable business, you should set about
collecting some preliminary information, covering price, terms,
sales/income level, cash flow, and general location. At this point,
don't worry too much about the full price - it's important, but at this
stage it’s enough that it is broadly within your budget. Examine the
basics of the business, making sure that it fits within with your
requirements, and even arrange (via your broker) for an on-site
inspection with the seller.
Visit the Business
Before you talk to the owner, you may wish to visit the business
anonymously to see if you like the location and the looks of the
business itself - both inside and outside. Pretend that you are a
customer. There is no point in going any further if you don't like the
physical location of the business or the appearance of it. Once you are
satisfied, you can ask the Broker to make an appointment with the
seller, to formally inspect the business.
Expand on the basic facts
If the business still looks interesting, it's time for you to get more
1. How long the business been operating? How long under the current
2. What is the rent? How long is the lease?
3. What have been the Sales/Profits for the past few years?
4. Can the Seller support the figures you have been provided with?
5. What Plant & Equipment items are included in the purchase price?
6. How is Stock/Work-in-Progress to be factored into the final price?
7. Why is the current owner selling?
It’s not yet time to have the seller's books and records checked out
completely. There will be plenty of time for that, plus review any other
issues, during the due diligence phase. At this time, you should try to
get answers to any questions that may have a direct bearing on whether
you may want to own and operate this particular business.
Make an Offer!
Once you have all of your basic questions answered, and you now want to
proceed with purchasing the business, it’s time to make an offer
(subject, of course, to verification of all the information with which
you have been provided). The main purpose in making an offer is to see
if the seller will accept your price and terms - it makes little sense
employing outside accountants/advisors and going through the time and
expense of due diligence unless you can reach agreement with the seller
on the financial arrangements. Remember that your offer is subject to
verification of the information that has been provided to you. The offer
is then presented to the seller who can choose to accept it, reject it,
or counter it with his or her own offer. You then of course can choose
to accept or amend the seller’s counter proposal, or reject it and walk
away from that particular business completely.
Once you and the seller agree on the price and terms, the next step is
for you to do your "due diligence." You may choose to do it yourself, or
bring in outside advisors - the choice (and the burden) rests entirely
with you as the buyer. Once you have double checked and approved any
areas of concern, your purchase of the business can proceed through to
settlement. You will then join the many others who have chosen to become
What does it take to be successful?
Certainly you need adequate capital to buy the business and to make any
improvements you want, along with maintaining some reserves in case
things start off slowly. You need to be willing to work hard and, in
many cases, to put in long hours. A business owner frequently has to be
the cleaner, errand boy, employee, bookkeeper and "chief bottle washer!"
Too many people think they can buy a business and then just sit behind a
desk and work on their business plans. Owners of small businesses must
Going into business for yourself
can be a daunting prospect, and there are simply no guarantees. At some
point, after all of your searching and investigation is completed, you
will still have to make that "leap of faith" that is necessary to
proceed with the purchase. You will have to work hard, perhaps even
"tighten your belt" a little and perform many different jobs to be
successful in your own business. However if running your own show,
making your own decisions, not having to worry about job security
(remember, no one can fire you from your own business), and just being
on your own are important - then owning a business is for you. After
taking this leap of faith, almost all business owners will tell you that
they would never go back to being an employee.